AIB wrote off almost £400,000 of Haughey's £1.14 million debt

A retired AIB manager has told the Payments to Politicians Tribunal that the bank was reluctant to force a sale of Charles Haughey's home or lands because he had just become Taoiseach. The former Regional Manager, Michael Kennedy, said that the bank could have lost customers because of the popularity of Mr Haughey when he became Taoiseach in December 1979. He said if the bank had been seen to get into legal confrontation it could have created resentment throughout the country and there would have been a flight of customers.

The Tribunal has been hearing about how the AIB wrote off almost £400,000 of Mr Haughey's £1.14 million debt in early 1980. The tribunal heard that Mr Haughey's lands and his residence at Kinsealy were held as security by the Bank against this debt. Mr Kennedy agreed with senior counsel for the Tribunal that the bank's refusal to recoup the money owed to them, by forcing a sale of the house and lands, was connected to the office held by Mr. Haughey. The Tribunal was told that following intense negotiations with Charles Haughey's accountant, the late Des Traynor, both sides agreed a final resolution of Mr Haughey's debt, which had risen to £1.14 million by the end of the decade. The Haughey camp wanted to pay only £600,000. The bank was initially only prepared to write off £200,000 because any more would have attracted the attention of the bank's auditors. Mr Traynor said he was far from optimistic about Mr Haughey's reaction. He told Mr Kennedy at the time there was no more rabbits to be pulled out of hats, or blood to be got out of turnips. In the end it was decided that £750,000 would be paid from an account at Guinness and Mahon bank, and £110,000 would remain as an interest free debt. In actual fact this debt was never paid off.

The deal was reached after several abortive attempts by Mr Haughey to get favourable treatment from the bank. The tribunal heard that in September 1976 Mr Haughey had lunch with the chairman and secretary of AIB. He asked that his £300,000 debt remain outstanding without any time frame for clearing the debt. The bank turned him down.

The tribunal also heard that around this time a loans manager at Mr Haughey's Dame Street branch was asked to hand over files relating to the account history to senior AIB managers, and told to ask no further questions. Mr Gerry O'Donnell told the Tribunal he could not recall if this happened with another file, and agreed that it was an unusual step. However, he said he had never had any contact with either Mr Haughey or his accountant Des Traynor. Throughout his time giving evidence, Mr O'Donnell maintained that he knew very little about Mr Haughey's account. But admitted that his debt of £1.4 million was "a sizeable figure". Mr Kennedy admitted that the less the manager knew about the case the better because, he said, of the extreme confidentiality necessitated by Mr Haughey's public profile.